What will the State give you?

If you don't provide for yourself in retirement, you can't rely on anyone else to.

The reason is simple. The income provided by the State is no more than a safety net, designed to give pensioners a minimum standard of living. Most of us will need to save a significant amount if we want to maintain our existing lifestyle.

Let's look at the factsState retirement income comes in two main forms:

The new State pensionThis provides a flat rate payment to those who have met the minimum National Insurance Contribution requirements. In the current tax year (2017/18), the new State pension is £159.55 a week for a single person.1

State Second PensionThe State Second Pension (S2P) is an earnings-related pension that replaced the former State Earnings Related Pension Scheme (SERPS) in April 2002. It's designed to top up the Basic State Pension and is based on earnings, providing most benefit to those on low incomes.

Living longer is bad for your wealthThe average life expectancy is going up all the time. It's not uncommon for people to live into their eighties and beyond. In itself, that's obviously a good thing. But think about it for a moment.

More retired people means fewer working people as a proportion of the population. That means fewer taxpayers supporting more pensioners. Which means that State pension provision is likely to be even less generous in the future.

A less taxing way to saveWhen you save for retirement through a pension, you enjoy tax advantages. For a start, the taxman boosts any contributions that you make to a pension through tax relief. Not only that, all the money invested grows free of income and capital gains tax. Tax relief depends on individual circumstances and may change in the future.

Notes

1 This applies to a man born after 6 April 1951 or a woman born after 6 April 1953.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.